If you are looking for a new car, a lease might just be the option for you. Car leases are less expensive overall when compared to purchasing a vehicle. This means that you will be able to enjoy a new car every so many years for a lower price than you would realize by purchasing one outright. As the retail price of new cars and trucks continues to go up, a lease may be the only affordable way to get that vehicle of your dreams and still drive away with money in your pocket.
Leases typically expire before any major repairs become necessary, so this is yet another area that you will save money in over the term of the agreement. There is also a manufacturer’s warranty included with all leased vehicles, This means that you will be covered in the even that a major repair does happen to become necessary during the term of the lease.
What Does Leasing a Car Involve?
There will some core principles you will want to be aware of when considering a lease. We will cover some of the more noticeable ones below so that you can make an informed decision.
Your Payments Reflect the Car’s Value
The monthly payment you will incur during the term of a lease is reflective of the car’s value. You will see the biggest overall savings when you choose a car that has a lower value in comparison to others on the lot.
Higher Residual Percent Saves Your Money
When you go to lease a car, take into account the residual value of the car. This is how your monthly payment will be calculated, and this is the amount of the payment that covers the depreciation of the vehicle. The lowest possible monthly payment will come with the car that has the highest residual percentage on the lot.
Understand Your Set Miles
A lease caps the number of miles that you will be allowed to drive the vehicle during the time that you are permitted to drive it. You will want to pay attention to your miles as there will be a set fee per mile over that limit that you will be charged when you go to turn the car back in. Knowing your driving habits will help you be comfortable with the mileage limitations that you will be under.
Expect a Disposition Fee
A lease can be equated to a monthly car rental in many respects, with the key difference being that you will need to pay a disposition fee at the end of the lease. This is a lump sum payment that will amount to between $300 and $500, and is not usually a way around this fee.
Understand What Your Money Factor Means
If you are familiar with the ARP when you go to finance a new or used vehicle, you can think of the money factor with a lease as being similar. You will want to look for the lowest possible money factor if you are looking for the most savings.
Is it Better to Lease or Buy a Car?
Since you are reading this page, you are mostly likely for a new car or truck. Before you decide whether to lease or to buy outright, it is important to weight the pros and cons of each. The ultimate decision will lie with your own unique and individual situation, so know the facts and how they apply to your before you sign the contract that is presented to you.
You Won’t Own the Car
Keep in mind that you will not own a leased car, so you are not free to many any major modifications like you would if you purchased it outright. You will only have permission from the dealership to drive the car for the duration of the lease, after which point you will need to run it back in. The caveat is that you will enjoy lower monthly payments, but remember that you will not be permitted to sell the car at any point.
Leasing Cuts Down Up-Front Costs
There will numerous up front costs to consider if you purchase a new vehicle. You will need to come up with a down payment and pay many lender costs, including interest, just to retain ownership over the vehicle. These costs will not be incurred when you lease a car. You will just need to cover the first month of your lease up front. In addition, there will be a security deposit, acquisition fee, and some taxes and fees to account for.
No Need to Worry About Selling Car Leases
When you purchase a car, you will inevitably want to sell it at some point. This is not always easy and you will rarely get what you want out of the car. A lease does not come with any such hindrance. You will not even think about selling the vehicle, so you can just enjoying driving it for a few years, and then hand it back when you are done.
When a typical loan term expires, the final payment means that you will own the vehicle outright. Keep in mind that the final lease payment simply means that it is time to turn the car back into the dealership.